My name is David Harman and I own a number of mutual funds. I would say that I am not a sophistocated investor but I am conversant with various investments including mutual funds. One of my mutual funds, the one I am counting on for retirement, is one of the funds alleged to be involved with the recent market timing and late trading scandal. I have followed the publicity surrounding this issue and would like to provide my comments concerning the proposed SEC regulations.

First it is clear that generally there are conflicts of interest in the operation of the mutual fund industry. If the 1940 act is to have any meaning those conflicts have to be eliminated or from a "real world" standpoint, their potential impact significantly reduced. While having a 75% outside director requirement does not completely eliminate the potential for conflict it is a step in the right direction. A chairman and president of a mutual fund company and who also serves in a management capacity of the advisor to the mutual fund simply cannot serve two masters.

Second, it appears more likely than not there will be a shortfall in the social security programs in the near future. It is clear to me that shortfall will have to be met by the individual, not the government. This means increased individual savings. Typically this is accomplished by mutual fund investment. The government has recently instituted and advertised incentives for increased savings programs to cope with this shortfall. Examples include increased IRA contributions, college savings, and medical savings accounts. In addition there is a significant move to require individual responsibility for investment decisions. For example for 401 plans to have options for investors to diversify where their money is placed rather than being required to hold only company stock. In order for this to work the investor must be in a position to have his or her interests served.

Third, with respect to mutual funds, costs significantly detract from investment returns. The amount of money or profit earned by mutual funds is way out of proportion to the benefit to the shareholder. A group of independent directors is in a position to properly allocate or determine what the fund will pay for services. Ultimately through withdrawals it will be the investor who must meet living expenses and make purchases to drive the economy; not the brokerage firms or fund companies. The more money returned to or retained by shareholders benefits everyone in the long run.

Fourth, better independent representation for the sharholder decreases the opportunity for internal "sweet deals" between the mutual fund company and the investment advisor; again maintaining an arms length relationship will benefit the individual investor. The companies charged have been audited and say there has been no loss to the investor. However that is not true. There has been a breach of trust. Monies that could have been used for investment have to be held in liquid form in order to meet the demands of late trading. There are probably other indirect losses as well.

In summary given the gigantic size of the mutual fund industry it is incumbent on the government to act on behalf of the individual (amall guys) to insure a fair shake is given. It is clear the industry will not do this on its own. It is for these reasons I support the SEC 75% independent director rule.